THERE is reason to cheer. India has resumed purchasing Malaysia's palm oil after a four-month lull — this, in the midst of fighting off the Covid-19 pandemic, is good news to oil palm growers.
Reports quoted trade sources, which said the buying was spurred by a fall in domestic inventories and discounted prices. It also alluded that the purchases came in the wake of warmer trade relations between India and Malaysia after Perikatan Nasional came to power. Malaysia is the world's second largest palm oil producer after Indonesia, and India is Malaysia's largest palm oil export destination, accounting for 28 per cent of the latter's total palm oil exports.
That some 200,000 tonnes of crude palm oil will be shipped out to leading Indian importers next month and in July is very promising. Let's take a step back. It was just earlier this month that industry leaders had warned of depressed palm oil prices for this year when the Movement Control Order (MCO) came into force on March 18. Most businesses and operations came to a standstill. They said there would be painful cost cuts as well as a reduction in global demand and boost inventories. Economists also said the key to survival was to keep operating costs down, manage our sells well and not run out of cash.
The Covid-19 lockdown in many countries had curbed travel and caused restaurants to shut down. The restrictions had sent the benchmark crude palm oil (CPO) to near 10-month lows at RM2,014 (US$464.59) per tonne. The contract started the year on a high at RM3,130 (US$723.36) per tonne. The bleak outlook was compounded when the Malaysian Palm Oil Association reportedly said there would be no less than two million tonnes of stockpiles if sales do not pick up. It also feared that the situation could revert to the 2018 year-end stock levels of more than three million tonnes. The Indian government, it was also alleged, was averse to Malaysia's views on Kashmir and its criticism of India's citizenship law, thus the boycott.
That's all in the past. After months of uncertainty and predictions of an economic recession, this news is light at the end of the tunnel. Sure, Malaysia has seen better days, but at this point of time, it's a positive development, says an economist — "something to cheer about amidst the gloomy outlook". India's renewed buying will shore up prices and demand for Malaysia's palm oil. The higher demand and prices could help reverse the sharp output contraction of 22 per cent in the first quarter of this year and the 16.9 per cent fall in the preceding quarter. It also means higher income for smallholders, and more jobs for locals, which she says are a sure sign of better days ahead.
Let's not read too much into it. India-Malaysia relations may have improved because of the change in government, but isn't that to be expected? In March, shortly after PN took over, it had vowed to resolve the trade dispute with India.
With Covid-19 still hovering in the background and the world economy almost battered, a country cannot afford to find fault or create problems with another. Priority should be on enhancing global trade and boosting relations to bring the world back on an even keel. Thanks to Covid-19, governments' first concern are the lives of the people.